Some savvy traders in the sharemarket have identified a new and relatively cheap way to invest in stocks. They get full-service advice, company analysis and research from a broker. Then, for about a quarter of the cost a full-service broker charges, the traders execute the transaction themselves, online.

Others, however, say it is a fact of life confronting the industry, and which in the long term could change the relationships between brokers and investors.

The trend was identified in a recent survey by the Australian Investors Association. President Bob Andrew believes the tactic is legitimate.

"People just don't think they're getting their money's worth out of the (full-service) broker," he says. That is evident in statistics that show online brokers facilitated almost a quarter of all trades in the three months to June 30, compared with 14 per cent for the corresponding period in 1999.");document.write("

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Australian Shareholders Association chairman John Curry says a combination of younger traders coming into the market, frustration with fund managers who have run up losses over the past few quarters and growing technical adeptness in the general population have propelled an increase in the number of people using online broking houses.

"I think as the market improves, and it's certainly improved in the last four or five months, people think, 'I'll take the money out of cash, I've been hoarding it there and I'll put it back into the market'," Mr Curry says.

Data from the ASX Broker Market Activity Report show that in the three months to June 30, the number of retail or smaller investors using online brokers grew by 20 per cent, compared with the full-year average.

The market grew for all retail sectors, but not as strongly.

According to Brett Spork, chief executive of No.2 online broking house E*Trade, this is because "a rising tide lifts all boats".

"We're seeing a return of the day trader (people who hold shares only briefly and capitalise on day-to-day stock price movements) and an increase in the market more broadly," he says.

Since its recent acquisition of TD Waterhouse, the main player in online broking, CommSec, has almost half the market. Chief executive Michael Blomfield says trade has increased 50 per cent since March, mostly among mums and dads buying and selling small parcels.

"But it's nowhere near the highs of 2000," he says.

This was when traders were taking huge profits out of technology companies before the so-called tech-wreck, which left a bear market that has only just started to recover.

"Our clients have spent the last 18 months to two years bargain-hunting," Mr Blomfield says.

"Now there are a number of stocks coming back into profit territory and that's giving them an opportunity to start churning their portfolios a bit."

Churning, or turning stocks over quickly, is made easier by online broking houses, where an investor can log on, execute a transaction for under $30 and move on - hopefully - to the next profitable trade.

Geoff Reilly, executive general manager of Sanford Securities, one of the smaller players in the online market, can see a time when do-it-yourselfers will dominate the market, and full-service broking houses, which often spend tens of millions of dollars on research, will have to charge for this information.

"If you look at what's happening in the US, a lot of research houses are starting to carve up that business from the retail (broking for smaller investors)," he says.

One factor that could precipitate this move is the mooted introduction of "statements of advice".

If planned reforms are adopted, brokers will have to give clients a rundown of every investment-related discussion.

Broking houses have complained this would be a time-consuming administrative nightmare and create costs that would, ultimately, be borne by clients.

An online broking firm, which offers general advice, would not have to supply such statements.

In the meantime, online brokers are capitalising on the trend that has prompted the growth in their client base. CommSec writes to Commonwealth Bank customers to invite them to sign up, attends trade shows and makes its presence known by providing TV and radio stations with market updates and information.

Some firms, such as Sanford, offer SMS updates on share movements and other up-to-the-minute alerts. The marketing drives are aimed at consumers conscious of getting value for money who are used to, and even expect, cheap deals.

Prices have risen from lows of $14.95 a trade but are still well below full-service offerings. A few years ago, there "were just too many online brokers and they were all discounting like mad and no one was going to make any money", Mr Horsfield says. "Now it's come back to a more sensible sort of model."

Mr Spork says most investors would look at a full-service broking house's rates of perhaps 0.8 or 1 per cent of the value of the trade and compare it with the 0.1 per cent that an online firm charges. "People ask themselves, what am I getting for the gap in the middle?" he says.

Securities Institute of Australia head of marketing Robert Swinton says it is not just a question of cost.

"Some people just like to have control of the trade and doing things themselves," he says.

Mr Curry says this is true, but self-directed traders also have to take responsibility for their own failures and wear the losses as well as enjoy the profits.

Mr Swinton agrees there is an element of do-it-yourself psychology in the growth in online broking.

He says this can also be seen in the popularity of do-it-yourself TV programs that teach about everything from home renovations to cooking and investing.

"It's funny how you never see any of the mistakes they make," Mr Andrew says.